Valoración de derivados europeos con mixtura de distribuciones Weibull

Valuation for European derivatives with mixture-Weibull distributions

Andrés Mauricio Molina Barreto and José Alfredo Jiménez Moscoso

MPRA Paper from University Library of Munich, Germany

Abstract: The Black-Scholes valuation model for European options is widely used in the stock markets due to its easy implementation. However, the model is not accurate for different assets whose dynamics do not follow those of a lognormal distribution, so it is necessary to investigate new distributions to price different options written on various underlying assets. Several researchers have worked on new valuation formulas, assuming different distributions for either the price of the underlying asset or for the return of the same. This paper presents two methods for European derivatives valuation, one of them, modifying the formula using a Weibull distribution with two parameters given by Savickas (2002) adding two new parameters (scale and location), and another assuming that the underlying distribution is a Weibull mixture. Comparisons are also presented with these models against existing models such as the Black-Scholes model and Savickas with a simple Weibull distribution.

Keywords: Weibull distribution; mixture of Weibull; valuation; European options (search for similar items in EconPapers)
JEL-codes: C15 C69 G13 (search for similar items in EconPapers)
Date: 2014-03-28, Revised 2014-08-08
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Published in Cuadernos de Economía 34.65(2015): pp. 279-298

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118572

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